ESADE study: 50% of consumers think a brand must be reasonably priced in order to be considered essential

According to the report presented during the Consumer Brand Conference, 34% of consumers consider themselves loyal to brands, down 9 percentage points from 2013

Fifty percent of consumers think a brand must be reasonably priced in order to be considered essential, a higher percentage than those who think that it must be different or exclusive. This was one of the findings highlighted in the Report on Evolution of Price Sensitivity in Spanish Consumers, 2009-2017, which was presented today at the Consumer Brand Conference at ESADE. The report also notes that 34% of consumers consider themselves loyal to their usual brands, although this percentage has fallen 9 points since 2013. Over the same period, the importance of special offers has risen by 2 points (32% of consumers say they regularly buy this sort of product) and the number of consumers who regularly buy the cheapest product increased by 5 points (18% overall).

“Cheap products are a sign of the times. Today’s consumers demand that products, whether high-end or low-end, be reasonably priced,” explained Josep Francesc Valls, Professor in the Department of Marketing at ESADE and author of the report. The study, carried out in collaboration with Mercadona, surveyed a sample of 723 consumers throughout Spain, proportionally weighted by region, gender and age.

The report highlights the growing popularity of shopping lists, especially in food purchases. Fifty-two percent of respondents said that they usually or always prepare a shopping list before leaving the house, and more than a third of consumers (36%) said they take the available family budget into account when drawing up the list.

E-commerce: essential for brands, despite not generating direct profits

During the conference, Bernat Morales, Director of External Relations in Catalonia at Mercadona, spoke about the company’s e-commerce strategy. He observed: “Today, we do not know of any traditional companies that make money with e-commerce. At Mercadona, even though we charge for home delivery – and this is something our customers don’t like – it still costs us €3 per customer. We are working to solve our logistical problems so that, at the very least, we do not lose money with this service.”

Jaume Hugas, Associate Professor in the Department of Operations, Innovation and Data Sciences at ESADE, noted: “Some companies even want to turn a profit from the e-commerce service, and that’s a mistake. Amazon, in contrast, subsidises this for their Prime customers – who get 5% of what they spend back – because the company knows that Prime subscribers spent up to three times as much as other customers.”

Along similar lines, César Valencoso, Consumer Insights Director for Southern Europe at Kantar Worldpanel, observed: “Although Mercadona’s e-commerce sales account for 1% of its total turnover, it should be noted that the company is the sector leader in Spain.” He added: “From a business point of view, it’s obvious that you have to be online even if you lose money, because otherwise you lose the customer.” Mr. Morales agreed: “At Mercadona, we did a test by suspending home delivery service in a specific area for a year. What happened was that, in addition to losing the 1% of our e-commerce customers, we also lost 4% of our in-store customers.”

Prof. Hugas wrapped up his remarks by noting that, nowadays, “the benefits of online commerce and brick-and-mortar stores must be analysed together, as it no longer makes sense to look at them separately”. Thanks to this sort of joint strategy, he added, “Walmart has grown by 54% in e-commerce over the last four quarters.” Prof. Hugas also observed: “There are no excuses for failing to invest in e-commerce, even for small businesses, despite the fact that it does not generate profits in the short term.” Finally, he added: “Someone should study the impact of e-commerce on traffic in cities, because it’s going to be brutal.”